2. What are the risks associated with the Athens Ring Road project? Do you believe that the concession structure proposed by Mr. Papadopoulos, as shown in case Exhibit 8 can ensure mitigation of those risks? Would you recommend any modifications to the concession structure and if so, what would those be?

Accurately assessing and mitigating any project finance risks is an utmost component which enables to deliver a successful project initiative. The complexity of such investments requires an extra careful analysis in order to avoid the breach of the initial assumptions which would eventually jeopardize the feasibility of the project. Consequently, Papadopoulos should elaborate a list which identifies the various risks that could undermine the outcome of Athens Ring Road and should prepare solutions in advance for each of those risks in order to limit or eliminate the impact of those in the project. Nevertheless, one should bear in mind that risk identification is a constant process as projects are continuously evolving and new risks may arise which would require an updated mitigation of those while others may dissipate or diminish their importance. Risks inherent into project finance vary depending on the type of project and on the exposure from different parties within the project. In his assessment purpose, Papadopoulos had four alternatives which demanded thorough examination where each option would bear advantages and drawbacks. The first option would resort utterly into public ownership. Government would bear the responsibilities from all the operations and would provide the necessary funds to build the project. Private sector would be left outside with no involvement. A further alternative was quite similar to the first. Yet construction and designing would be granted to the private sector which would transfer some of the total risk towards the private. Nevertheless, Government would have to bear all the funding costs. The third scheme demanded a more involvement from both parties. The Greek government would negotiate a contract with the private sector which would require a joint distribution of risks and responsibilities. Under this concession agreement, the private sector bears most of the project costs and its development/maintenance, whereas government would still maintain the control of facilities. In this scenario, the allocation of risks was more evenly distributed. The final alternative was the opposite from the first. It was a private ownership which excludes any obligation from the government. Exhibit 1 unveils the different stated alternatives and there effects in risks, financing and control.

Before reaching a final conclusion one should enumerate potential risks for the success of the project. The criterion of risks used should consist in a chronological event. As so, there are two crucial phases yielding different risks with distinct timelines: the construction, or precompletion, which consists in the phase since the start of operations until their accomplishment and the operational, or postcompletion, which refers to all the logistic involved after the construction of the project is delivered. Furthermore, there are risks that can be found in both construction and operational phases which should be addressed. The first risk identified is related to the fact that it is a greenfield project which obliges to create facilities from scratch. As a consequence, even if tries to replicate a successful similar project it should have more risks than established firms in that line. In addition, the magnitude and complexity of Athens Ring Road accompanied by the lack of experience from the public and private sector made the project highly vulnerable to deviations from the initial assumptions, namely schedules to be obtained and budget costs. A greenfield premium from investors could be demanded when valuing such project as to follow the risk-return tradeoff. Construction Risk

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